Setting Up Fiscal Rules in Lesotho: Kingdom of Lesotho

Author: Qianqian Zhang and Motseki Khiba

Lesotho’s fiscal policy has long been shaped by volatile SACU revenues and persistent expenditure pressures, calling for a more rules-based and forward-looking framework to ensure sustainability.

Volume/Issue: Volume 2025 Issue 140

Publication date: October 2025

ISBN: 9798229026659

$15.00

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Topics covered in this book

This title contains information about the following subjects. Click on a subject if you would like to see other titles with the same subjects.

Exports and Imports , Economics- Macroeconomics , Public Finance , Fiscal rules , debt sustainability , stabilization fund , fiscal reaction function , operational rules , debt ceiling , Overdue obligations clearance , Debt sustainability analysis , Fiscal space , Debt sustainability , Fiscal governance , Government debt management , Debt limits , Fiscal rules , Fiscal stance , Fiscal sustainability

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Summary

Lesotho’s fiscal policy has long been shaped by volatile SACU revenues and persistent expenditure pressures, calling for a more rules-based and forward-looking framework to ensure sustainability. Recent efforts to formalize a fiscal rules framework offer an opportunity to strengthen medium-term planning, anchor debt dynamics, and build resilience to shocks. The proposed framework should center on a debt ceiling of 60 percent of GDP, a debt anchor of 50 percent of GDP, and a structural deficit target of 3 percent of GDP, supported by operational expenditure and wage-bill rules. A savings fund (stabilization fund) should be set up and be anchored on the fiscal rules, serving both stabilization and investment purposes.